tv Bloomberg Markets European Close Bloomberg May 5, 2016 11:00am-12:01pm EDT
are watching the european close on bloomberg markets. ♪ mark: here is what we are watching today. a political power struggle in turkey. the prime minister plans to step down as the president strengthens his grip on the country. what does this mean for the economy in the region and its repercussions around the world? vonnie: bringing more risk back to the market here we will have the investor perspective. the u.s. april jobs report is just around the corner. the snapshot is expected to have an impact on fed action through the spring. we will break it down. what to respect -- what to expect? vonnie: let's head to the .arkets desk where julie hyman
he see what is going on the commodities markets, still some concerns. major averages are bouncing back from the two-day decline we saw. they are gaining a little bit of steam as the day goes on. individual stocks contributing the most to the games include energy producers like exxon mobil and chevron rising along with order prices. coming out with earnings that beat estimates, not indicating -- drug pricing, that of been a concern with analysts. the gains, it is down
by 1%. it is a particular victoria's secret comparable sales down 1% in april. analyst tap-in had -- had been projecting games. april sales missing the estimates as well. take a look. the rate for these companies, earnings lies, 3.8%, that is the gap between estimated earnings and where companies have actually reported earnings. saying the beat great on the part of companies is the highest mid 2010. the s&p 500, since the beginning of veering season, if you look
two thirdst, is up of 1% p.m. most of that came a week or so from the earnings is. we have seen declines since then. what will happen when earnings season is over? sentiment is not great right now. one measure of that is that during the current rally in the there have been less inflows into etf then during prior increases in stock. you have the various rallies in the stocks over the past he does he or's and in mid-2014, we saw 35 billion in the rally we saw current areas in the rally, only 3 million, and that indicates a lower level of confidence. groups are rising today. we broke a four-day losing streak. the game is up one third of 1%. fourth the u.k.'s against supermarket chain.
a second straight quarter of sales growth, .7% ahead of estimates, signaling the change made by the new chief executive, who stabilized the business after a four-year slump. sold -- unprofitable stores, it is still a highly competitive marketplace. shares are trading up by 2.24%. thethe luxury carmaker, engine maker, trading so far this year has matched expectations. restructuring plans are starting to work and full-year earnings are waiting toward the second half of the year. chief executive reiterating the 2016 will be a challenging year overall. it is transitioning between products and responding to weaker demand.
the division mainly serves the oil industry and shares are down by 2.5% today. we have had a trio of disappointing pmi data this week. today's peak -- please of information was on services and it fell to the lowest level in three years. this is a wonderful chart showing services, manufacturing, and instruction since 2013. this is the time you want to look at. all three have slowed this week. manufacturing contracted for the first time since 2000 -- 2013. it sets it up very nicely for next week's bank of england interest rate and quarterly inflation report. cannot wait. vonnie: you have got to love the first week of the month for pmi. let's check in on the first word news this morning. taylor has more from the newsroom.
regulators.r the issue, when you get a credit card or certain types of loans. they were are you to settle disputes for arbitration. today, the consumer financial protection bureau would oppose a rule that would let people bypass lawsuits. bankers will probably challenge it in court. in western canada, the wildfire has forced 900 more people to flee their homes. 80,000 others have already been evacuated. it has disrupted oil sands operations. thellas judge has ordered former cleveland browns quarterback to have no contact with his ex-girlfriend. he was in court less than 15 minutes before being released on a $1500 bond. no plea was entered but his defense attorney says he plans to plead not guilty.
news 24 hours a day powered by 2400 journalists in whether 150 news bureaus around the world. the power struggle in turkey came to a. this morning. the prime minister said at a conference that he is leaving his job and not seeking reelection. ofte i believe instead changing the associate, it would be more correct to replace the leader to maintain the unity and solidarity. in these circumstances, i am not considering being a candidate on the next congress. mark: the breakdown is a fresh era of clinical uncertainty. joining us for more is the bloomberg view columnist, turkey will -- he says turkey's last shreds of balance are disappearing. a great piece that i learned a lot by reading.
there were many interesting points. just a few years ago, there was a lot of people who were named by the president and one by one, they have all disappeared. >> yes, for most observers, it is one of the sad stories about the. they came to power, the development party came to power in 2002 and then he became prime mr. and put together a team on the economy. both were very well regarded in the market. well-qualified. they did a great job. it has to be said that in those early years, -- did a good job. the president -- he moved on, and at the time, it
became -- he became foreign minister. he was part of the team. foreign policy is not everybody's cup of tea, but he was all five. an academic in foreign affairs, well published. well-qualified. that team has gradually broken away and loyalists have been put in place, not necessarily so , and now, he who was always very loyal, no power base of his own, apparently not loyal enough, will be replaced. we will see who the new characters will be. vonnie: strengthen his grip on the economy, is economic growth and the strength of the economy in debt now? >> in a sense, yes. one should not overstate this, but what has happened in turkey in the year so far is you had,
after a very difficult year with two elections and a lot of clinical risk and uncertainty, things had seemed to settle down , and investors were coming back in. $4 billion of short-term investment and portfolio investment that moved back into turkey. inflation had started to come down. starting to strengthen after a long time of decline. things were going pretty well. they were able to start talking legitimately about reducing interest rates. you have reversed that trend over the last couple of days and bond yields have gone right up. nots weakening and it is clear what happens now. i think a lot depends on whether it decides that his party is better by having an election, that they might be able to get the kind of majority he wants in
order to pass the constitution and just how much he is willing in just getting the constitution he wants to give himself all presidential powers, which is part of what he disagreed with. mark: thank you for joining us. i recommend you viewers read that he's on bloomberg view. the european close, we just recapped all the latest out of turkey. what does it mean for investors? that is next. ♪
york, i am vonnie quinn. mark: i am mark barton. vonnie: time for a look at some of the biggest is the stories in the news right now. amazon taking another step toward building its own cargo airline. and by the smudges a 30% stake -- it will operate 20 cargo planes for amazon. in march, amazon said at least -- oeing 77 traders ford is investing 182 million dollars in a new cloud computing startup, pivotal software. a venture of cfp and vmware. for trying to boost itself while it prepares for a shift to electric and self driving cars. the disney ceo had a rare official meeting with the chinese president today a couple of months before the opening of disney's billion dollars theme park. in china's financial hub of shanghai.
the comfy's first-team park in mainland china will open june 16. that is your bloomberg business flash for the hour. unrest in turkey may be pushing investors away, but our next guest is jumping right in. chief investment officer joins us now. , 85%eign high-yield bond invested in emerging markets, the most recent transactions in turkey, the prime mr. stepping down and saying he will not run again and the decline, would that make you think twice about turkey or double up on your bets? >> it would probably make me think more than twice, 10 times. and doleep well at night not worry a lot about political goings-on's. if you look at the history of interest rates investing and bond markets, one of the best ways of investing in bonds is
sorting bonds on value, which we describe as sorting bonds on high nominal or real yield, so after inflation. historically, that approach pushes you to word hired yield countries like turkey. about two percentage points per year, history, with very well studied. our sovereign high yield bond fund by the top third of world fun yield or's ends up with a much higher yield portfolio with countries a little bit scary. vonnie: a 9.5% yield, is that enough premium for the risk you are taking right now? think so. of course you never want to own just one bond and one country. if you own turkey or greece or russia, who knows what could happen with those countries. but if you buy -- you end up with a great portfolio, having a great year this year. one thing we always tell people is if it -- it is not just about buying highest yield her spirit we are also avoiding lowest yield her's.
issued by five countries, u.s., france, germany, u.k., japan, it yields about 50 basis points. a lot of europe has negative yield at this point. just moving away from the low yield her's toward the high yield her's, you end up with a much better portfolio. mark: how at risk is the to aing market portfolio potential more hawkish fed, he said that may be does deliver on two rate hikes or even more in 2016? : historically, if you look at a high-yield portfolio, has a little bit higher drawdown historically than the traditional market cap or portfolios. scenario where it has with bothwell
scenarios. it is well positioned. the spread between the portfolio and a global portfolio now, it is at high -- hyatt -- higher levels. european stocks are preferable on a relative basis to the united states, yes? mebane: yes. stocks are different. they are not terrible, it is not a bubble. a lot of the developed world is quite cheap. european stocks coming emerging europe, a lot of countries in europe are super cheap. in end up with a lot more developed countries. you end up in greece and spain and italy but still you have the crossover in russia and brazil. of the bestis one opportunities in the cheap countries. another etf that buys the cheapest companies in the world and as cheap as they have been, although it back to the 1980's, an exceptional time for the chief act that is, you can do
double digits in the next five to 10 years. >> what are you seeing for the u.s. dollar, how are you hedging in terms of currency risk where you see currencies weakening for the most part? mebane: if you look at currencies, three main factors driver turned. value, purchasing power, trend, interest rates, and inflation. right now, we say the u.s. dollars overvalued against currencies to her not terrible against some, the let's call it 10%. has been hugely bullish for the past number of years, it looks like it is starting to reverse in 2016. the u.s. dollar could be entering into a bear market. lastly, interest rates. that is different. are lower yielding, europe, japan, and switzerland. a lot are higher-yielding. a little bit of a mixed, but in general, bearish on the dollar compared to most world currencies. what isnal question,
the single best investment in the world right now? if i had to put my money, and i do, because i invest 100% of my net worth in the funds, bolo low value, which invests in the cheapest countries, a nice diversify. much,: thank you so mebane faber of cambria investments. crude is climbing for a second day up 2.8% there. that is crude oil futures. ♪
let's chat. is that longer than we thought? in line with what we thought? another six or so years? sure it has necessarily been forecast, but it is certainly a long time. europe,an in 2010 in and now we are talking 21, 11 years, it is a long time. if you think in the u.s., the banks got their act together iny quickly and i don't large part thanks to the u.s. government, they managed to deal with the issues. it drags on and on. for u.s. investment firms or others who have cash to put to work, it is a great time to be in europe. the legacy of a financial crisis. >> exactly. these are assets that tanks have on their balance sheet, perhaps real estate that went bad or mortgages that of underperformed
that they want to get rid of, or businesses they no longer want to be in. so-called non-core, i.e. no longer important to a fair doing. it is a long and lengthy and .rawn out process it says a lot about europe. vonnie: they assume there will be a higher at some point. they assume they get a real ignition of interest? >> i do not think there is a lack of interest, per se. in some ways, you could say it is the opposite. saying they really want to buy this stuff, but it is too slow coming out. we raised money and got ready to buy but it has been a slow process. things could last until 2021, it gives you a sense of how much longer this trend and this market and the supply of assets
will last. give us an idea of context. where do they fall in the context of high-yield assets? you have a real mixture. back in 2010 and 2011, you had assets trading, we spoke to pete and they were trading at five cents on the euro. terribly distressed. i think a lot of that stuff has been sold. otherssuch as rbs or still have large assets they want to get rid of. mark: who are the biggest buyers? buyers include oak tree, lone star, you can notice the trend they are all american. a lot of cash. mark: thank you. five more years of solid loan disposals in europe.
take a look at higher pin equities. fromly four minutes away the close of the session. three out of four are now lower, the main equity benchmark in still, the benchmark that matters, the stocks 600 is fourng up by 1/10 of 1% up days of decline. these are the industry groups performing best and worst. it is still an earnings story and i will be telling where about those earnings in just a few minutes. the european closes next. stay with us. -- close is next. stay with us. ♪
the day the stoxx europe 600 was up by more than it is now . we are holding onto gains after four days of losses, the longest run since march. dominated byay earnings from a number of companies. it proposed spending up to 6 billion pounds to upgrade britain's principal broadband network, seeking to fend off criticism it has done too little to upgrade it. it outlined the investment plan to separate it from the rest of the company. bt shares up 2.6 percent today.
things have been made worse by an acquisition last year of talisman. it was a $13 billion acquisition. what it did was burden it with the debt. this is how the big oil majors in europe have fared. i want to tell you about center, -- centric, the biggest supplier of energy in the u k the placing amounts to about 7% of its capital and will allow it to accelerate it, to prioritize
and attract acquisitions. vonnie: now let's get some u.s. data. you can see canada is dropping a little bit. by turkish lira weakening 1.2%. after wewn almost 4% got the news of the prime minister stepping down. japan's markets are unchanged. but i did want to point out the 30 year yield in japan is upset 27 basis points. look at the 30-year yield here in the united states. .t is down my that it has been there is still that major gap. so money flowing out of japan these days. the s&p 500, not much movement.
let's get more from the nasdaq. abigail doolittle's live in downtown manhattan. shares areip advisor down sharply after the company did miss the first quarter consisted -- consensus estimate. and apparently waiting on the 's majoris the company transition to instant booking. while there could be some long-term potential, he maintains a neutral rating, saying it could be a rocky road ahead for the next few quarters, something that many investors may not have the stomach for. at the what about stocks nasdaq creeping into the green a little bit? rising nicelytock is yahoo!
phony that what is probably behind this move tradings the stock higher in sympathy with alibaba, which posted a strong quarter. foralls yahoo! a "tracker" alibaba. over the last -- this year, a --e, yahoo! did put in this is typically bullish. perhaps there is more bullish action ahead. vonnie: thanks a lot. let's check in now on our first word news this hour. taylor riggs has more. trump will not self fund his general election campaign. is -- stevew can the chief was named
fundraiser. and american diplomats .orked out a truce almost 300 people have been killed in aleppo the last two weeks. those supporting assad have exchanged fire. they tunnel discovered it israel. mortars atire israeli troops. will elect a new mayor of london. he is the antiestablishment candidate who is shaking up politics in the philippines. self-professed killer
and womanizer who claims a bloody war on crime. this strongman swagger in the call for the execution of criminals has fans calling him the punisher. today intocks trading of a string of reports. our next guest says the strength of the u.s. dollar will have a huge say in the direction of the markets over the rest of the year. us --admin shane joining edmund shane joining us. the dollar is key. heading, which direction and at what pace and why do we care?
edmund: if you look at the u.s. it is important notably for emerging markets. we would see quite strong support from a number of markets, most notably emerging-market equities. what is interesting is you have seen big flows in the last month into emerging markets etf's, but this is only a small correction of what has been a four-your slide in exposure to emerging markets. mark: so much -- so how much upside might we see in the emerging-market equities from here? and do you have any preferences? we just had a guest who said a basket of countries from turkey, from russia, from brazil to would serve hungary you well despite the risk. edmund: i think that's right.
you have to look at the fx. -- you have to look at the fx. i think there is a strong long-term argument. -- in short-term couple the short-term, let's take a look at the five-year view. thestrong valuation of currency in the local currency equities seem to be building up your exposure to emerging-market equities for the long-term. most not forget that institutional bets are underweight. the weakhe drivers, dollar one and oil prices is the other. let me remind you, on a cyclically adjusted pe basis,
russia traded under four times. whatever you say, it is incredibly cheap in the equity world. vonnie: do you consider china and emerging-market? is that one that you would be including quite heavily? edmund: absolutely. we like china. the problem with china is that it is always the same. cei, you arehe hs not buying real exposure to the broader economy. you are buying lots and lots of banks, which are state-owned enterprises. , the portion of the chinese stock market we like the least. we really like the s&p new china index. three areas that are growing much faster than general gdp. so this new china index is a way to do that.
you are buying underlying growth in the chinese economy, but in the steelbanks producers, which we believe are part of the old economy and are condemned to continue to underperform going forward. vonnie: when you say you buy that index, do you put it all on that index? or do you also by other asian nation equities, for example, to try to hedge against china just in case? edmund: i think there is a good argument to buy asia generally. if the chinese economy stabilizes and grow somewhere in the 5% to 5.5% region going forward, that is good news for other economies within the asia-pacific region. some of the at undervalued markets, such as south korea. south korea is very interesting because it is not really in emerging market economy. but if you look at the actual economy itself, it is rather advanced.
it is much closer to japan than it is to china. and yet the trade, again, very cheaply. that i wouldiwan suggest would be a good idea for those wishing to play of the larger china complex in the longer-term mark:. mark:-- longer-term. as you know, the strong euro does have a rather negative correlation to european equity markets, certainly relative performance. gh to some extent on european companies. we are alsotime, seeing some decent underlying strength in the european economy. indeed, if you look at the gap between european economic growth on one hand and u.s. economic growth on the other hand, the gap between the two is actually narrowing. anything, europe actually
looks reasonable from a growth perspective going forward. you focus onwhen some of the peripheral economies, which are growing quite quickly, such as spain and, of course, ireland. mark: yes. edmund, thank you for joining us. edmund shing. in the island will vote for a new premise or tomorrow. i will fightk and it out today, minding stocks -- mining stocks against dividend pairs. ♪
-- the charts. kicking things off is oliver renick, who has already broken the rules by changing the charset he teased. : here is what we are looking at, two lines basically looking at manufacturing in the u.s. and europe versus the stock markets in both regions. the white line is the spread between the u.s. pmi manufacturing versus the euro zone manufacturing pmi. the blue line is the spread psi in the ftse. here is a common theme where the u.s. economy has been slow. its services has been better. you still have an
outperformance. this blue line says that the s&p its europeang counterpart. i think this is interesting because the services story, more and more of u.s. companies derive their money from services. for. the first time since 2007, 50% of earnings come from services. vonnie: is this a measure of delusion than? oliver: that is a good question. either investors realized that driving revenue from services or they just like u.s. stocks. 4, subsection three of the battle of the charts rulebook says that you are not allowed to change your charts at the last minute. it's been quite a day in
the sun. ,ince mining stocks bottomed which took out the stoxx 600 up by 60%, taking its valuation to roughly 16 times estimated earnings to 30 times estimated earnings on april 20, what was interesting about that was, the same period, the valuation for the stoxx 600's move from --ghly 14 times to 15.29 15.229 times. since 2009.highest what is interesting, since april 20, we have seen a pullback in the valuation, the share price of the basic resources index within the stoxx 600. the index itself is down by 11%. it is still the best
performing industry group on the stoxx 600 with a 13% gain. the index itself is down by 9%. . but the valuation gap has moved from 1.9% to 1.7%. this datan is that out recently from the likes of the u.s. and china could point to a slowdown in commodities demand. so the big question is have commodities not only oliver renick had their day in the sun? mark, you need to take a bow. you have impressed me so much today. but i'm afraid i'm done a have to give oliver the title. because it is pmi week. thank you so much. is used to mark winning. you will take it in your stride.
says shareholders have signaled overwhelming support for the deal. it sits substantially undervalued. chrysler says the new deal with google will jumpstart of the self-driving car business. these two companies have agreed to build a driverless minivan. think anything that is done in collaboration with somebody with the caliber of google is by definition going to expedite the developer process because we are giving them a state-of-the-art car and they are giving us the technology. that, nation is bound to accelerate everything. mark: still, the deal with google isn't exclusive. barclays is carrying out its profits. selling 1/5 of its stake to money managers.
the chief executive last month said that the bank would retreat from africa. that is the latest bloomberg business flash. vonnie: let's look ahead to tomorrow. the u.s. jobs report for april already. obviously, the first friday of the month. bloomberg estimates the economy gained 200,000 jobs. the unemployment rate at 5%. we believe that has moved to 9.4%. mike mckee joins us now with a look ahead at the report and what it means for a possible june rate hike. first of all, i want to or onete that 200,000 hundred 95,000 is a bit lower than what we were looking at, but it is still healthy. mike: it is still healthy. he keeps us within the average range.
i have said they are expecting that kind of growth to continue and the unemployed and break to keep going down. you are right. it is 4.9%. if we get that, that argues for an earlier rather than later fed move, which is what a lot of the fed officials who have been talking lately have been saying. vonnie: speaking of fed officials, the st. louis fed speaking right now from the santa barbara county fair. the headlines i am pulling out of this is that gdp and inflation expectations support on thekets rates view one hand. and on the other hand, he says the july meeting. mike: the markets view and the fed to you, both. we have seen a slowdown of to this point. that's why the market is so pessimistic. but the market forecast is that things are going to pick up. if the economy picks up as the fed thinks, and we will get some clues tomorrow with the jobs report, that makes june a very light meeting.
mark: if ever there was a good time to bring up about capital, listen to what he said about the possibilities and what would move him -- about bob capital, listen to what he said about the possibilities and what would move him. the job data is going to get weaker or more likely gdp is going to get stronger. i'm expecting the latter. personallypens, i would be moving toward advocating some removal accommodations sooner rather than later. slowdown, therter first quarter slowdown happened in 2015 and happened in 2014. twot of that, the previous was due too the weather. you can't cite that is a big factor this time.
my to the bounceback be more difficult to achieve this time? mike: no one really knows. there is a feeling at the fed that there are some seasonal problems, that the first quarter is difficult to adjust. maybe it is not the weather this time, but maybe it is something to do with the calendar, maybe the holidays at the end of the fourth quarter. to a man and woman, fed officials say they believe jobs rather than gdp. we measure jobs better and is a better indicator of where we are. thanks for michael mckee. 495.e looking for
scarlet: good thursday afternoon. alix: here is what we're watching at this hour. oil is driving the market moved today, energy producers lifting u.s. stocks higher. scarlet: a different story emerging markets. elon musk promises to reduce half a million electrics starting in 2018. will he be able to deliver on his promises? scarlet: let's head over to the markets desk. oil pricesned rising, giving equities a lift off of its three-week low. julie: right. it is a bounceback affect.